VAT On Diesel Generator Sets : CESTAT-Jurishour No. 1 Latest

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Value Added Tax (VAT) has been paid by the appellant on the supply of Diesel Generator Sets and therefore, service tax is not liable to be paid under Supply of Tangible Goods service.

The bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that where the VAT is paid no service tax can be demanded.

Background

The appellant/assessee was engaged in leasing of Diesel Generator Sets to lessees on the basis of lease agreement by which the monthly lease charges were recovered by the appellant. The appellant has not paid any service tax on the amount of lease amount recovered from the lessee under the category of “Supply of Tangible Goods service” since May 2008.

The department has entertained a view that the appellant have evaded service tax amounting to Rs. 1,67,93,120/- and therefore a show cause notice dated 07.10.2013 came to be issued which was adjudicated by the order where under service tax has been confirmed under Section 73(1) of Finance Act, 1994 and equal amount of penalty has also been imposed under Section 78 of the Finance Act, 1994.

Interest on the demanded service tax has also been confirmed. The show cause notices for demanding service tax for the subsequent periods were also issued and confirmed by the Adjudicating Authority and the appellant has reached to the Tribunal.

Arguments

The department contended that while providing Diesel Generator Sets on lease basis, the appellant has not transferred the right of possession and effective control on the Diesel Generator Sets and therefore, the appellant should have paid the service tax under the category of Supply of Tangible Goods service.

The assessee contended that it transferred the right of possession and effective control during the use of the Diesel Generator Sets to the lessee and applicable VAT was paid on such transaction and therefore, the transaction of leasing of Diesel Generator Sets is considered as deemed sale. Therefore, as per law the same is not liable to service tax.

The appellant has relied upon various decisions in support of his case holding that the lessees were responsible for maintaining and operating and incurring operating cost of the Diesel Generator Sets during the tenure of the lease period. The appellant has no responsibility for operation and maintenance of Diesel Generator Sets from the date of handing over of Diesel Generator Sets to the lessees and it was the lessees responsibility for operation and maintenance.

The assessee contended that the Adjudicating Authority have not appreciated the fact that appellant has paid VAT on the transactions between them and the lessee for the period 2012-13 onwards.

Also Read: NO SERVICE TAX ON SERVICE OF CLINICAL TRIALS PROVIDED ON DRUGS SUPPLIED BY FOREIGN SERVICE RECIPIENT: CESTAT

Conclusion

The tribunal held that the assessee has regularly paid amount towards VAT liability in respect of the subject goods, the question of claiming service tax does not arise.

FAQs

Is Service Tax Payable on Supply of Diesel Generator Sets if VAT Already Paid ?

No. Value Added Tax (VAT) has been paid by the appellant on the supply of Diesel Generator Sets and therefore, service tax is not liable to be paid under Supply of Tangible Goods service.